This morning saw price-moving news updates from Falkland Oil and Gas (LSE: FOGL) and Moneysupermarket.Com Group (LSE: MONY), along with a sharp move upwards in South32 (LSE: S32) shares.
Are these three firms a buy, or should you look elsewhere in today’s market?
Falkland Oil and Gas
Shares in Falkland Oil and Gas moved lower this morning after the firm said that the completion of the Isobel Deep well would be delayed by a further 10-15 days.
The cause of the delay is a suspected zone of high pressure which has convinced the well’s operator, Premier Oil, to run a narrower pipe (‘casing string’) within the existing wellbore before continuing.
This isn’t the first delay to Isobel Deep, which was originally expected to be completed in early May. However, the Falkland Oil isn’t liable for the costs of these delays.
A successful result could be significant for the firm, as the well is targeting estimated mid-case unrisked gross prospective resource of 243 million barrels of oil, of which Falkland’s share is 97m barrels.
Although today’s update did mention that oil shows had been seen in the current drilling zone, well partner Rockhopper Exploration cautioned that this did not necessarily indicate oil would be found in the target zone.
Results from the Isobel Deep well are now expected in early June. With Falkland Oil and Gas shares now below 30p, I believe they are reasonably priced as a speculative buy.
Moneysupermarket.com
Moneysupermarket.com founder Simon Nixon has sold a further £56m of his shares in the firm, in a discounted placing at 280p per share.
The sale, which netted Mr Nixon £56m, equated to 3.7% of this holding and reduces his remaining stake to 12.8%. Moneysupermarket’s share price fell by around 6% following the news, before recovering slightly to 289p at the time of writing.
Today’s placing comes after an aborted sale earlier this year, when Mr Nixon said he would sell 35m shares, but cancelled at the last moment. The reduced size of this sale makes me wonder if investor appetite for the stock is weakening.
Moneysupermarket.com shares have been hitting record highs recently. With a market-leading position and a 25% operating margin, the quality of the business is not in question.
However, there is a risk that regulatory challenges or reduced payouts from the firms featured on Moneysupermarket’s website could weaken future growth and profitability.
In my view, Moneysupermarket is fully-priced at 288p, which is 20 times 2016 forecast earnings.
South32
After a slow start on Monday, shares in BHP Billiton spin-off South32 rose by 7.6% on Tuesday morning, climbing to 116p.
As a BHP shareholder, South32 is a stock I’m interested in.
Earlier this year, I did some rough calculations which suggested that a fair value for South32 shares would be between 115p and 140p per share, based on the value of its assets. However, valued on a forecast P/E basis, using the mining sector average of 16, I estimate South32 shares could be worth less than 100p.
Overall, I suspect the current share price is about right.
South32 has promised to pay 40% of underlying earnings as dividends: however, if income is your top priority, I believe there are better options elsewhere.
